Myanmar Solar Tender 2020: What Should Hopeful Bidders Watch Out For?July 30, 2020
The tender launched in May by the Electric Power Generation Enterprise (“EPGE”) for 30 sites totaling 1,060MW in Myanmar made quite a splash and was even subject to an unsuccessful claim by the newly created Myanmar Competition Commission for illegally discriminating against foreign bidders.
Bids were due on 17 July 2020 with reportedly a total of 155 proposals submitted. With controversies now behind them, hopeful bidders awaiting the list of responsive bidders expected in early August and the list of shortlisted bidders five days after that should be in the process of preparing for the next steps in the event that they are indeed shortlisted.
Negotiating the Power Purchase Agreement
There are still a number of unknowns in relation to the negotiation of the Power Purchase Agreement (“PPA”). In particular, it is unlikely that EPGE will hold separate negotiations with each of the 30 shortlisted bidders. In previous tenders, large meetings with various sponsors were organized to conduct collective tenders. However, given the current COVID-19 travel restrictions and prohibitions of large gatherings, it is yet to be seen how EPGE will handle any online or physical meetings – even though we have seen the authorities using technologies such as Zoom in recent months.
In terms of commercial points, and while EPGE has made it clear that a number of items would be subject to negotiations, bidders should not expect a fundamental rewrite of the draft PPA provided as part of the tender. We suggest bidders to pick their battles wisely and select a limited number of issues without which they would decide not to proceed with the project and to focus mainly on those issues.
In terms of commercial items, the fluctuation restrictions set out in the PPA were largely seen by bidders as meaning that the facility would have to include a storage system. Clarifications will have to be given by EPGE on the exact storage requirements, especially considering the absence of a grid code to regulate this operational aspect.
Issuance of the Letter of Acceptance
Given that the PPA will only be executed upon the start of commercial operations, the only agreement bidders will have with EPGE during the construction period will be the Letter of Acceptance (“LOA”). Sponsors should, therefore, start the conversation early on with EPGE regarding items that should be included in the LOA to grant them protection, including delays for force majeure (especially in the time of COVID-19) as well as EPGE’s assistance in relation to permitting.
Investment permitting for the Project
Given the tight timeline for the Project’s implementation, sponsors should not wait for issuance of the LOA to start preparing for permitting, particularly the preparation of the application file for the investment permit from the Myanmar Investment Commission (“MIC”), which requires extensive preparation.
This will be increasingly important, as appointments for the Proposal Assessment Team (“PAT”) meeting will be on a first-come, first-serve basis; the MIC will have to handle all 30 MIC permits in addition to its usual caseload.
Receiving the MIC Permit will be crucial, as sponsors will only be entitled to tax exemptions on imports (notably on Chinese solar panels) after the MIC Permit has been issued.
While incorporation of a project company is now a matter of days in Myanmar, sponsors should, as soon as possible, finalize negotiations of the joint-venture agreement with their partners as well as receive corporate approvals to start implementation, particularly for larger or listed groups with a heavier governance process.
Land and environmental
Sponsors should be ready to sign their lease agreement with the respective landowners shortly after being selected, in order to start negotiations as soon as possible and apply for land conversion, if necessary, as this will be required in order to start construction. Finally, if not done already, sponsors should select an environmental advisor and submit an Environmental Management Plan to the government and hope that the government will approve the plan within the legal time frame of 30 working days.